Thoughts on Life, Love, Politics, Hypocrisy and Coming Out in Mid-Life

Wednesday, March 23, 2016

America's Shrinking Middle Class

On the campaign trail this political season one hears much of about the decline of America's middle class and what should be done to stop the financial hemorrhaging and slide of many from once somewhat comfortable middle class status. As the image above shows, out of twenty one (21) advanced countries in the world, America now places last in terms of the percentage of the national wealth that it holds. Things did not used to be this way. The irony is that the Republican solution is more of the very policies that have so ravaged the middle class: continued attacks on labor unions, efforts to slash the social safety net, massive wealth transfers to the 1% and corporations, and opposition to increasing the minimum wage. Yet, through appeals to religious extremism and racism, too many Americans are duped into voting for those who are their true threat. A piece in Business Insider looks at the bleak picture. Here are excerpts:

A study from the Pew Research Center in
December showed that middle-class Americans are no longer in the majority.
Whereas in 1971 middle class Americans totaled 80 million, and lower- and
upper-income classes combined equated to 51.6 million, the 2015 data looks far
different. As of last year, 120.8 million adults were in the middle class but this figure now takes a back seat to the 121.3 million combined lower- and
upper-income households. Aggregate wealth for middle-class households is also
shrinking according to Pew's research, from 62% of all wealth in 1970 to just
43% as of 2014.

However, one report released last year highlighted a
middle class statistics so shocking that you'll probably do a double-take.

The 2015 Credit SuisseGlobal Wealth Reportis now in its sixth year of examining
and analyzing wealth across the world in order to get a better understanding of
wealth creation, consumption, saving, and asset allocation. Every year Credit
Suisse picks a specific wealth topic to focus on, and in 2015 it was the middle
class.

Now here's where things get
interesting . . . Credit Suisse also looked at
what percentage of wealth the middle-class comprised within a country. Of the
21 countries individually examined . . . As a percentage of total
country wealth, the U.S. middle class accounted for thelowest
share of wealth among developed countries, such as Germany and
France, as well as emerging markets like China, India, and Brazil.

Why do U.S. households have so little net wealth relative
to the total wealth of the country as a whole? It looks to be a number of
factors at play.

First, the housing bubble from
late last decade really sapped the net worth out of middle-class households.
Although home prices have recovered from their lows, some areas have recovered
slower than others. The housing price collapse is still fresh in many
Americans' minds, and many fear overreaching on home prices even in today's
growing economy.

Secondly, access to credit is
arguably easier in the U.S. than in many other regions of the world. During the
housing boom in the mid-2000s, this was a great way for middle-class families
to grow their wealth. However, the housing bubble, combined with high debt
levels, have chipped away at middle-class household wealth.

A third issue? Stagnant wage
growth. According to data from the U.S. Census Bureau, median household income
has actually dropped by roughly $5,000 since 1999 to a median of $51,017 as of
2012. Pew Research pointed out that in spite of nominal wage growth of 727%
between 1964 and 2014, in constant 2014 dollars (meaning when taking inflation
into account) real wage growth has totaled just 7.8% over 50 years. College
tuition, medical care, and even fuel costs have risen at a faster pace, thus
diminishing the buying power of the middle class.

Fourth, there's quite an income
gap between the richest Americans and the middle class in the United States.
According to CNN, the U.S. has 42% of the world's millionaires, and basically
half (49%) of all people with $50 million or more in assets.

Finally, near record-low lending rates aren't
helping. The middle class, which was hammered by the stock market decline
during the Great Recession, has few avenues of safety to turn to with CD and
money market rates losing to an already reduced inflation rate.

The piece goes on and looks at things middle class families can try to do to improve their circumstances, but sadly fails to look at the systemic problems and failed policies that are accelerating the economic and financial downfall of the American middle class.

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Out gay attorney in a committed relationship; formerly married and father of three wonderful children; sometime activist and political/news junkie; survived coming out in mid-life and hope to share my experiences and reflections with others.
In the career/professional realm, I am affiliated with Caplan & Associates PC where I practice in the areas of real estate, estate planning (Wills, Trusts, Advanced Medical Directives, Financial Powers of Attorney, Durable Medical Powers of Attorney); business law and commercial transactions; formation of corporations and limited liability companies and legal services to the gay, lesbian and transgender community, including birth certificate amendment.

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